These days it’s easier than ever to make purchases. With most items only requiring a click, tap, or swipe of a credit card, you’re able to quickly purchase an item without ever thinking twice about it.
The problem lies in that most people don’t keep track of how many times they’re using their cards in a month. Then, when their statement comes, they realize just how fast all those little charges can add up. As a result, anxiety quickly sets in when trying to figure out exactly how to pay the outstanding balance.
Before you jump right into trying to pay down debt or hiding your statements hoping the debt will go away, it’s essential to have a strategy in place that will help you pay off your credit card debt.
Set Up Automatic Payments
Because your payment history plays the most significant role in your credit score, you never want to miss a credit card payment. That’s why it’s important to set up automatic payments each month before you begin tackling your debt.
You’ll want to set your auto payments to at least cover the minimum payment. While your goal should always be to pay more than the minimum, this ensures you make your payment on time and avoid penalties or dings to your credit score.
Debt Repayment Strategies
1) Consolidate and transfer your total debt.
If you have several high-interest credit cards, you may want to consider consolidating your debt. An easy way to consolidate debt is by transferring the balances of your existing credit cards to either your lowest interest-rate card or by opening a low-rate credit card at the credit union.
Once you transfer all outstanding balances to your lowest-rate credit card, you’ll instantly start saving money on interest each month. Plus, with only one payment each month, managing your remaining debt will be much easier.
2) Make smaller payments.
Most people make one large credit card payment each month. This tactic leaves many feeling disheartened as a big chunk of their money disappears in an instant. Instead, consider making several smaller payments throughout the month. While technically you’re paying the same amount, psychologically, it doesn’t seem as significant. You can either make a small payment each week or time your payments with your paychecks.
3) Focus on the credit card with the highest interest rate.
Many credit cards available through big banks and store-sponsored cards come with hefty interest rates – some even as high as 29% APR! If you have multiple credit cards, focus on the card with the highest interest rate. Each month, pay as much as possible toward this credit card balance while continuing to make the minimum payment on your other cards.
By eliminating your highest interest rate credit card, you’ll save a significant amount of money that you would normally be paying in interest. Once that credit card balance is paid in full, move on to the next highest interest rate credit card.
4) Pay off the credit card with the lowest balance.
You may prefer to focus on paying off the credit card with the lowest balance. This strategy may work better for some because, psychologically, it tends to feel as though you’re eliminating the debt faster. Plus, once you pay off the first credit card, your confidence will increase, and you’ll be more motivated to continue the process.
We’re Here to Help!
Credit card debt has a way of sneaking up on people and can easily become overwhelming. However, with a bit of planning and the right strategy, you can be on the road to being debt-free in no time.
If you are looking for a low-rate credit card to consolidate your debt or need additional ideas to help you gain control of or manage your debt, we’re ready to help. Please visit us in-branch or call us at 410-584-7474 today.